Buy To Let Going Out Of Fashion With The Wealthy

Lisa Smith, BA (Hons), CeFA

Wealthy property investors no longer regard buy to let as a good home for their money, according to new research.

Although a quarter of high net worth individuals rent out buy to let homes, only 7% plan to expand their portfolios.

This contrasts with a third of the wealthy with more than £600,000 in cash to invest who considered property as one of their key investments not so long ago.

The statistics come from a new report by Rathbone Investment Management, who asked more than a thousand British investors and 500 HNWIs for their views on buy to let and other property investments.

Tax and lending squeeze on landlords

The main reasons they gave from pulling back from the market were tax changes introduced by the government that penalise higher rate taxpayers buying rental homes with mortgages and new regulations making buy to let loans harder to source.

Since the turn of the century, investing in property has been a popular move in the UK.

Just under half of people (49%) claimed investing in property was better than saving cash into a pension, when asked by the Office of National Statistics.

Rathbone’s found that one in four HNWIs made their fortune from investing in property, with 17% still holding private homes, 8% owning commercial property and 5% land.

Property investment making less sense

Robert Szechenyi, investment director at Rathbones said: “Recent changes to the tax and regulatory treatment of buy to let has caused investors to take a step back and assess the viability of these investments.

“While it’s understandable that residential property has been a popular investment in the past, it’s now making less and less sense. Not only are the returns now being impacted by an increased rate of tax, but they can also prove high risk investments due to a lack of diversification. Property investments require a large amount of capital to be held in one single asset and landlords will often hold several properties within one region.

“Investors who are looking to invest in property, should make sure to assess their risk appetite, look at all alternative options and make sure this property is held within a well-diversified portfolio of investments.”

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